Surviving or Thriving: Beta Business Models in the New World

Summary from the Beyond Broadcast Blog

Panel IV: Surviving or Thriving: Beta Business Models in the New World

Panelists include:

Mark Cooper, Consumer Federation

Diane Mermigas, The Hollywood Reporter

Dan Nova, Highland Capital Partners

Moderator: Patricia Aufderheide, Center for Social Media

Panel Presentations

The panelists discussed how public media should embrace changes in their operational and financial models in terms of using various levels public participation. They also discussed investor and citizen decision-making methods to fund new public participatory media sites.

The following are key points from the speakers.

Diane Mermigas, The Hollywood Reporter

The challenges public media face are not different than those of commercial media– the latter are asking the same questions. Both commercial and public media need to do the following:

· change their orientation and embrace interactivity,

· understand how technology empowers the consumer,

· redefine the concept of content,

· deepen advertising and commerce,

· reinvent business models, and

· view the process with an entrepreneurial spirit.

Focus on the strength of public media – strong content

Although this technology environment will last all of 10 minutes, it is a place to start. There is a need for a credible voice that represents “alternative” expression not previously known - just as “content” has on the internet. Public media need to create an organized effort of producing content that is creative, independent, diverse, credible, and in-depth as well as link to education and problem-solving to all citizens. This will ensure public media’s survival and their ability to make money – which should be viewed as a good, not a bad, thing.

Media property rights - from video to text - are also influx, present the risk of being repurposed or sliced and diced, and endanger reducing the amount and concept of “original” works of art. Currently, the web is deliberate system with most online companies posting content through a filtering system and users consuming only what they specifically seek, which narrows their interests and creates an information vacuum. BBC, MTV are examples of using the passive broadcast model on their web delivery services when they could be more interactive – and more profitable.

The role of public media is thus to fill the void of the marketplace and monetize these ideas. Public media should learn from these decisions to create the following services and interactivity:

· TIVO,

· Ipod,

· Open TV, and

· Visible World.

Seek strategic partnerships

There are a variety of partnerships that public media should pursue. Serving as a content provider to other businesses can include providing local content, such as to Google. At the April 2006National Association of Broadcasters conference, they discussed working with cable operators to obtain local advertisers as these operators have a local connection. Media companies with such partnerships have increased local advertising revenue growth by 30 percent in the past four years – as opposed to the usual three to four percent. Public media should do the same and align with consumer technology companies to expand digital delivery options.

There are also many unknowns, especially as old media financial targets and benchmarks are used to evaluate and set new media goals - without knowing how consumers will ultimately use the quickly-evolving technologies that will also affect new, unanticipated forms of expression, [such as Second Life.] Thus, making assumptions is challenging and focusing on the consumer is key. Overall, for every challenge, there are at least two opportunities.

Dan Nova, Highland Capital Partners

There is a problem of the “needle in a haystack” of online media companies/services. A new online firm is funded every day and they are all excited about the Web 2.0 world. Audience trends show that new outlets of public participatory media can grow exponentially as early as the first year, such as YouTube growing up to 6.5 million users and Technorati reaching 1.5 million users.

Low costs of participatory media and attractive business models

The old adage of “If you build it, they will come” has changed to “if they build it, they will come.” Participatory media presents many attractive low cost and high value content that in turn affect the criteria investors use to fund new participatory online sites.

Participatory media costs

· Low costs to attract participatory media

· Low customer acquisition costs

· Low customer retention

· Low marketing

· Low content development costs

· Low technology (open source)

Characteristics of quality content

· Easy to use

· Effective

· Entertaining

· Participatory

Acquisitions are increasing

Traditional media are being squeezed, which are cash rich that can also be a liability. New media have had financial success, but the business models are moving quickly. Now, old media is competing with new media to buy new-new media.

How to evaluate participatory media websites through three main development stages

New opportunities

· Focus on the team.

· Assess how the idea compares to the existing competition.

· Review the development time and cost.

· Don’t emphasize the business model specifics – it is premature.

· Look at a valuation range of 0-5 million upfront.

Mid-stage value drivers

The mid-stage of participatory media development is a tenuous time and is dangerous for investor as the valuation is based on the initial ‘buzz’ - not hard numbers of tried and true audiences.

Later stage companies

Assessing later stage companies provide some of the same fundamentals as the new opportunities.

1. Focus on the team.

2. Assess the revenue streams and sources.

3. Review the margins.

4. Confirm the financial sustainability.

5. Critically assess the business model - very important.

6. Assess where the biggest windows exist.

Other characteristics of the successful later stage companies include: an “insane” customer focus, simple content presentation, huge market, active/missionary leaders, and constant improvement.

Mark Cooper, Consumer Federation

Business models discussed at this conference have largely been based on charity or advertising. In order to for them to be sustainable, public media must have a public purpose. The trends all show the revolution has arrived, especially as the two biggest commercial TV stations are putting their content on the web for free. Once measured by the household (radio, television), media consumption metrics are per the individual (internet, on demand); thus, changing the benchmarks and terms of media.

Changes in the public media audience – new creators

Public media should go to VOD on the internet as attention is the challenge - distribution is not the problem. Of course monetization is another problem for public media. Media cannot be a one-way company in a two-way world. The old media presented a push approach and treated the audience as mute. Now they can see the explosion of self-expression. The old media cannot ignore the public are creators, users, and speakers. The old media will try to make the public ‘feel’ as though we are interactive which may not be the case. A new way to assess media delivery is that old models are broadcast, cable TV, public TV and the new is “Independent Noncommercial TV” and the “networked individual.”

Much growth still needs to occur within the new media users as the current 40 million bloggers amount to less than one percent of the world population – public media need to reach the other 90 percent. At the same time, the internet, while useful, timely and convenient lacks public trust – to the extent local television ranks higher.

Recommendations for membership-based participatory media

One out of every two Americans are apart of member of a cooperative – namely credit unions which are a trust institutions. Information is also trust issue and can use this concept of a membership-based, participatory organization to create their own credible content. The public should form and pay dues to media membership organizations to create their own local news so that the people can decide what is newsworthy. They should look for a base in civil society organizations and ask people to pay to join a group that allows them cooperatively provide their own content.

Ironically, civic society groups are pushing back on this idea comes as they believe the government should fund such public media. However, “you can’t speak to power on power’s nickel.” Professional journalists are also suspect of citizen journalists and such membership organizations.

Professionally-trained journalists should conduct the investigative work but media organizations should also have a space for citizen journalists to report other types of news and information.

Overall, the old media format is to report, edit, and control responses and have such [limiting] mottos as “All the news that is fit to print.” The media presented at this conference seek to break this top-down approach - from Google to Wikipedia. All of these models have different functions and are open and closed to varying degrees. If you give participants the chance to be a member and use more functions, the more they will be willing pay dues to have an impact influence beyond their community. We can have a chance to make that revolution.

END